However, I try to remember the farmer in Nebraska, oil rig worker in Houston, or the lobbyist in Washington D.C. (or indeed every person in the adjoining D.C. district) is living a different economic experience. Indeed, in the metro Detroit area are 3 major counties - one of those [Oakland] was some 10 years ago the 2nd or 3rd 'richest' in the country. Showing the changing direction of the country as public work (or in the private sector finance) have come to dominate wealth creation, this mantle has been take by counties in Connecticut (hedge fund land) or a swathe of counties in the D.C. area as the federal government largesse creates 'wealth'. [Mar 11, 2010: [Video] America's 3 Wealthiest Counties Now Ring Washington D.C.]
All that said, to feel it and see it is one thing. But when you see the statistics it is still quite staggering. Truth be told, due to union auto contracts (of old, they have changed dramatically) it was not so much the high end that kept the average wages up in the region, but the low end of the income chain was far higher than would be considered 'reasonable' versus education levels. Hence part of this situation is a 'return to mean' - but the pace is traumatic. As I've touched in other pieces on why automotive (stock) related investing is now a good thing, new labor contracts have made entry level blue collar work not much more expensive than your typical Walmart employee. Good for profits, not so great for labor class. The situation in Michigan is not a trend that has happened in the past 3-4 years - while the rest of the country enjoyed a boom coming out of the Bush recession of 01-02, this region had some modest uptick but nothing of the magnitude of the rest of the country. And it had been falling (2005+) well in advance of the Great Recession as 'globalization' wrecked havoc on the manufacturing base (auto and non). Simply put, it's been a 1 state Depression.
Put into raw numbers, the average household lost over 21% of income in the past decade - roughly $12,000 a year, or $1000 a month. (national average 6.6%) That would be hard enough to adjust to in a generation, not to mention in 9 years. Income ranking has dropped from 16th in nation to 35th in less than 10 years. In the entire United States, 13 of the hardest hit 25 cities are in Michigan... in many cities households have had to adjust to 25-33% reductions in income in 9 years. Staggering.
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Should you care? Maybe not - unless one believes what happened in Michigan is a canary in the coal mine for what is happening (slower and less dramatically) in the rest of the country, as the middle class is slowly but surely being decimated by some structural global forces. [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?] As income and wealth disparity continue to expand, much of this was hidden by the house ATM earlier in the decade, and now the government ATM. (try to imagine our economy without government and federal reserve intervention at every turn). It will be interesting to look back in 20 years to see how this turns out.
Via Detroit News:
- For most families in Michigan, the long-running recession has meant a simple, unrelenting truth: living with less. And census data released on Tuesday shows how much less -- the state's median household income fell by more than $12,000 over the last decade -- the equivalent of trimming $1,000 from a family's monthly budget.
- The drop was stunning in both its size and its singularity: No other state came close to losing the estimated 21.3 percent of its median income between 2000 and 2009, and no state endured the 6.5 percent drop seen from 2008 to 2009.
- Dana Johnson, chief economist for Comerica Bank, thinks the scope of the income losses alters how we view the economic carnage. He no longer says Michigan was in a one-state recession.
- Nationwide, median household income was down 2.9 percent from 2008 and 6.6 percent from 2000.
- Most states with higher incomes have more educated work forces. For Michigan, it's high-paying, lower-skill manufacturing jobs that obscured the need to create knowledge-based economies, Metzger said. Ranked 16th in income in 2000, the state had plummeted to 35th by 2009, now nearly matching its rank in terms of higher education. "Our income did not represent the tie between income and education,"